India central bank may deliver third straight rate cut as inflation undershoots

MUMBAI: India’s central bank is widely expected to deliver a third consecutive rate cut on Friday as muted inflation provides ample space to focus on boosting economic growth further.

A strong majority of economists, 53 of 61, in a Reuters poll expect the Reserve Bank of India’s monetary policy committee (MPC) to cut the repo rate to 5.75%.

Two respondents see a cut of 50 basis points and the remaining six expect no change.

“Despite no pressing need for a third successive rate cut on June 6, we expect the MPC to cut - an opportunistic move amid the lower-than-expected inflation outcome and outlook, and retain the stance as ‘accommodative’,” Barclays economists wrote in a note.

“The RBI may be tempted to lower inflation forecasts, but it may be prudent not to,” they added.

Retail inflation has slowed faster than expected and dropped to a near 6-year low of 3.16% in April.

RBI to cut rates by 25 bps on June 6, then once more in August

The RBI expects it to average around 4% during the year but many economists expect it to be lower.

On the growth front, India’s GDP surged 7.4% in the March quarter, much faster than forecasts and driven by construction and manufacturing.